The Joint Committee on Carbon Reduction unveiled legislation on Feb. 4 that would establish the Oregon Climate Action Program to place a cap on greenhouse gas emissions for entities whose annual emissions exceed 25,000 metric tons of carbon dioxide equivalent. The bill would set an annually declining emissions budget, starting in 2021 to put the state on a path to achieving a reduction of 45 percent by 2035 and 80 percent by 2050, relative to 1990 levels. If the legislation is approved, Oregon will become the second jurisdiction, after California, to implement an economy-wide carbon cap-and-trade system. Democratic Governor Kate Brown commended the measure expressing support for a comprehensive market-based program to reduce emissions and transition to a clean energy economy. (HB 2020)

The legislation would create a Carbon Policy Office to adopt the program by rule. Electric companies would be entitled to direct distribution of allowances at no cost for an amount equal to 100 percent of their forecast emissions to serve retail customers until 2030, after which, the amount would decline proportionate to the allowances available in the annual budgets. Manufacturing entities engaged in “emissions-intensive, trade-exposed processes,” would receive allowances at no cost during the calendar year 2021.

The bill would provide exemption for certain sources including emissions from fuel used for aviation, watercraft and railroad locomotives, from combustion of municipal solid waste to generate renewable energy, and emissions attributable to certain consumer-owned utilities. Fluorinated greenhouse gases generated during the manufacture of semiconductors and related devices would be exempted through 2025.

Under the bill, covered entities would be allowed to meet up to 8 percent of their compliance obligation using offset credits and up to 4 percent using credits sourced from offset projects that do not provide direct environmental benefits in the state.